Long-Term, Integrated Insurance Programs Experience Rebound in Commercial Lines

Long-term, integrated-risk insurance policies are making a comeback in the commercial lines sector, according to an article in the July property/casualty edition of Best's Review.

These policies blend traditional coverages—such as property, liability, and crime—with such nontraditional coverage as financial risk. They also go beyond the usual one-year terms to cover from three to five years. Long-term, integrated policies first won favor in the late 1970s and saw limited success through the early 1980s, until a shortage of capacity on the part of insurers and reinsurers led to their decline.

These specialized policies have rebounded in recent years, the Best's Review article says. In 1995, for example, insurance brokers and risk-management consultants J&H Marsh & McLennan placed only one of these programs. By summer 1997, they were involved in 20. By the end of this year, the company expects to have placed about 40 major property/casualty combinations. Insurers say one factor fueling the trend is the prolonged soft market, which has heightened competition among brokers and insurers seeking to distinguish themselves in the alternative market. They also say the multiline, integrated approach allows for lower administrative costs and speedier claims handling.

Underlying these transactions is the establishment of a long-term partnership between the insurer and the insured. "The intent is a non-cancelable deal for both parties," says Michael B. Johnson, senior vice president of J&H Marsh & McLennan. "Certainly, the big benefit is it takes the insured and insurer out of the annual renewal cycle."